Here’s how Ned Davis Research’s Neil Leeson reached that conclusion. He screened for ETFs with the most sensitivity to a rising yield curve. The result might surprise you. Leeson found that the number one result when it comes to yield-curve sensitivity is the iPath Dow Jones UBS Lead Sub Index Total Return exchange-traded note (LD), which ostensibly has nothing to do with Treasury yields. But the ETN turns out to track the 10-year yield minus the 2-year Treasury’s spread “fairly closely.” Funds and notes to track sugar, copper, and crude oil also do relatively well.

Why would commodities do so well? It makes sense insofar as commodities benefit from inflation and strong economic growth — two of the phenomena that often occur with a steepening yield curve.

The lead ETN has just $4.7 million in assets, making it untradable for the average investor. Fortunately, you don’t need to limit yourself to arcane corners of the commodity ETN market. Some energy-sector stock ETFs also have an above-average relationship.

One that Leeson identifies is the $1.4 billion Market Vectors Oil Service ETF (OIH). Because of the tight link between the Russian stock market and the oil business, the Market Vectors Russia (RSX) also comes out well.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.